Could a Trump presidency actually be good for stock markets?

The most pro-business President ever – or a danger to free trade? (Source: Getty)

Adrian Lowcock, Mark Leigh

Adrian Lowcock, investment director at Architas, says Yes.

Markets are still digesting what a Trump presidency means for investors and, although comparisons with Brexit are overstated, we could see some more volatility.

Longer term, the result could be good news for stock markets. The shock result may mean that interest rates do not rise in December – looser monetary policy will be supportive of the economy in the short term.

A Trump administration is more pro-business and plans to implement a huge fiscal stimulus programme with significant infrastructure spending. Such a policy will benefit commodity stocks, industrials and banks, providing a boost to the economy. It is also inflationary, which would be supportive of equities as they offer some protection against inflation.

His election is good news too for the pharmaceutical industry which could rebound from subdued levels when the market was concerned over the impact a Clinton presidency would have had on their businesses. Likewise Trump has promised to ease up on regulation of US banks.

Mark Leigh, chief operating officer at Xtrade, says No.

If the initial reaction to Donald Trump’s victory paints the picture for his presidency, then he is clearly bad news for markets.

While we can’t judge exactly what’s in store with Trump as the leader of the world’s largest economy, it’s likely his movements will continue to breed volatility and uncertainty. There are strong criticisms of the impact his vow to lower taxes will have on the deficit, and the likelihood of the US raising barriers to trade in a bid to “Make America Great Again” is also largely unfavourable for global markets.

With Trump at the helm, there is the danger that trade between the US and major business partners like China will stall. If that is the case, expect periods of sluggish growth, low productivity growth and falling living standards.

It’s too early to be so sure, and sometimes markets overreact to news events, but the economic climate so far suggests that the incoming President will be bad for growth and bad for global trade.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.